The title to goods passes when the parties intend it to pass.
There are generally 2 approaches when considering the question of when does title to the goods passes to the buyer if not agreed by the parties:
a. Specific Goods
What are Specific Goods?
The definition of “specific goods” is set out in section 2(1) of the Sale of Goods Ordinance (SOGO):
“Goods identified and agreed upon at the time a contract of sale is made”.
Relevant laws
If the transaction involves specific goods, then it is always the first step to check the contract to see if there is any intention as to when the property is to pass (section 19 of SOGO).
If not agreed by the parties in the contract, then the default rules in section 20 of SOGO Rules 1- 4 would be applicable to ascertain the intention of the parties as to when the title is transferred:
- Rule 1: Where there is an unconditional contract for specific goods and the goods have been put in a deliverable state, the property passes at the time of the contract and it is immaterial whether the time of payment or the time of delivery or both, be postponed.
- Rule 2: Where there is a contract for the sale of specific goods and the seller is bound to do something to the goods, for the purpose of putting them into a deliverable state, the property does not pass until such thing be done, and the buyer has notice thereof.
- Rule 3: Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do some other act or thing with reference to the goods for the purpose of ascertaining the price, the property does not pass until such act or thing be done, and the buyer has notice thereof.
- Rule 4: When goods are delivered to the buyer on approval or “on sale or return” or other similar terms, the property therein passes to the buyer—
(a) when he signifies his approval or acceptance to the seller or does any other act adopting the transaction;
(b) if he does not signify his approval or acceptance to the seller but retains the goods without giving notice of rejection, then, if a time has been fixed for the return of the goods, on the expiration of such time, and if no time has been fixed, on the expiration of a reasonable time. What is a reasonable time is a question of fact.
b. Unascertained Goods
What are “Unascertained Goods”?
Unascertained goods are goods that are not specifically identified at the time a contract of sale is made.
Relevant laws
If the transaction involves unascertained goods, it is also the first step for parties to check the contract to confirm if there is any intention as to when a property is to pass. If such intention is absent, then section 20 of SOGO Rule 5 applies.
Under section 20 of SOGO Rule 5(1), the property passes when goods are put in a deliverable state and are unconditionally appropriated to the contract by the seller with the consent of the buyer (or vice versa).
Key Takeaways
- Generally, the title to goods passes when the parties intend it to pass.
- Specific goods are goods identified and agreed upon at the time a contract of sale is made. Check the contract to ascertain when the parties intend to pass the title to the goods.
- Unascertained goods are goods that are not specifically identified at the time a contract of sale is made and the title passes only when the goods are ascertained even if the payment has been made.
